Getting credit is much easier when you don’t need it. For those who are just starting their business, establishing business credit is an important step. Business credit score is one of the main factors that will affect the lender’s decision on whether they should work with you or not.
HERE ARE FIVE WAYS TO ESTABLISH YOUR BUSINESS CREDIT
1. Mind your personal credit rating
One of the biggest factor in many banks or financial institution’s decision to initially lend money is the client’s personal credit ratings. It is important to boost your credit score by paying your personal bills on time. Also keep a low ratio of debt to available credit on personal credit cards and credit lines. Make sure any balances remain under 30% of your limit on credit cards. Moreover, lenders will often check the personal credit of any investor or business partner with more than a 20% stake in the business.
2. Apply for credit before you need it
To begin building a credit history for your business, apply for at least some sort of credit soon after starting up. A small business will often have to establish itself for two years before a bank feels comfortable offering a sizable credit line. But there are ways around that, such as getting a business credit card or applying for a small bank loan. If you have trouble scoring even a small loan, consider opening a store-based credit line or getting a small secured credit card with a low limit.
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3. Grow your credit and use it
According to Wayne Sanford, owner of a credit consultancy, New Start Financial Corp. in Allen, Texas, many businesses with desirable credit histories applied early for business credit cards and credit lines and used them as early as possible. Once you’ve established a payment history, request an increased credit limit — even if you don’t need it right away.
4. Forge relationships with more than one lender
Do not put all your financial eggs in one basket. Banks can change their lending policies on a moment’s notice and cut your credit limit overnight. Try having a credit card through a major bank and your credit line through a locally-owned bank or credit union.
5. Consider alternatives
You don’t have to just focus on traditional banks as your only shot at credit. There are other options such as securing investors, asset-based lenders, factoring, peer-to-peer lending and crowdfunding sites.
Vidalia Lending offers a variety of loan programs suited to your financial needs. For your business expansion, you can choose between our Business Loan or Small Business loan. Business loan allows you to borrow up to P500,000, while Small Business loan allows you to borrow up to P100,000.